Feds Target Perata's Family and Friends

Inquiry focuses on alleged influence peddling by powerful state senator.

Details: Staff writers Will Harper and Chris
Thompson contributed to this
report. This story was first
published at EastBayExpress.com
on Thursday, November 18.

In the public corruption investigation of Don Perata, federal authorities are searching for evidence of payments to family members, friends, and companies that have close financial relationships to the state senator, according to a copy of a federal subpoena obtained last week by the Express.

As first reported here last week, the FBI is targeting Perata in an investigation of Lily Hu, a former aide of the state senator and the most influential lobbyist in Oakland. In a few weeks, Perata is scheduled to take over as president of the Senate, making him the second most powerful politician in the state.

Federal authorities are searching for evidence of illegal payments by companies and persons made directly to Perata, or through an intermediary such as Hu, with the intent of making sure they received a contract or a project approval from the city of Oakland, two sources said. The subpoena appears to show that the federal investigators also are looking at Perata's children, a current staffer, and a friend from college as possible intermediaries who would accept payments and then redirect them to Perata.

Subpoenas issued by the US Attorney's Office show that federal investigators have cast a wide net. The subpoena obtained by the Express demands documents showing payments to or financial arrangements with Hu and Perata and:

 Perata's college buddy Timothy Staples, a Sacramento political consultant, and his companies Staples and Associates and Ascendent Solutions.

 Political consultant Sandra Polka, a former longtime assistant of former state Senator John Burton, whom Perata is scheduled to replace.

The subpoena demands "all records referring or relating to direct or indirect payments of monies or items of value" along with all correspondence with the above people and companies. The information is to be supplied to a federal grand jury in Oakland, which has been impaneled and is taking testimony in the case.

The Express obtained a copy of a subpoena that was sent to an entity the newspaper has agreed not to name. It is unclear how many companies and persons have received such subpoenas. Two high-placed sources who have talked to federal investigators say they believe subpoenas have been issued to current and former clients of Hu and others associated with Perata.

Both the FBI and the US Attorney's Office decline to comment on the case.

At an impromptu press conference Thursday at the Oakland Airport Hilton, where he was giving a speech to African-American business leaders, Perata said: "I have not been, nor has my office been, in contact with any authorities associated with any investigation."

Perata holds great sway over the city as head of Oakland's Democratic political machine. His closest political ally is Oakland City Council President Ignacio De La Fuente, who is considered one of the leading candidates to be the next mayor of Oakland and he also has close ties to Hu. Perata is the top fund-raiser in the East Bay and has helped engineer the election of more than a dozen political allies throughout Alameda County. De La Fuente told reporters outside the Oakland Hilton Thursday that he had no comment on the federal investigation.

Federal investigators appear to be looking at Perata's children, Staples, and Polka as possible financial intermediaries. Perata has come under scrutiny before for similar financial arrangements involving his son and Staples and campaign funds.

Nick Perata has received more than $500,000 worth of campaign consulting work from his father and state and local initiatives backed by his father since 2000, according to a story earlier this year in the Oakland Tribune. He then paid back his father more than $100,000 by paying rent on an office and a home owned by the elder Perata, according to Don Perata's statements of economic interests and interviews.

The son also has purchased two homes from his father in the past two years, public records show. Nick Perata sold one of those homes to his sister, Perata-Rosati, who has been paid more than $10,600 by her father for campaign work in the past two years, according to the state Secretary of State's Web site.

Perata spokesman Jason Kinney told the Tribune earlier this year that the money Perata pays his son each year as a campaign consultant and the money the son returns to him in the form of rent represent "fair market value" for services rendered, and is not illegal.

Perata also has steered more than $300,000 in consulting work to Staples, as reported earlier this year by the San Francisco Chronicle. In return, Staples has hired and paid Perata, who works as a consultant under the name Perata Engineering.

Two Perata-controlled committees have paid Polka, a Sacramento-based political consultant, $64,875 for consulting and professional services since March 2003, campaign finance records show.

As an aide to John Burton, Polka specialized in redistricting issues. The city of Oakland hired Polka in 2002 to help redraw city council districts. In the '90s, the city hired UC Berkeley Professor Bruce Cain as its redistricting consultant. Cain says he told Oakland City Attorney John Russo's office that he was interested in redrawing the lines this last time around, though he doesn't recall submitting a formal job application. "The next thing I know," Cain says, "she [Polka] got the job."

According to a March 2004 Chronicle story, Polka set up a business near the Capitol called Polka, Perata, Rosati & Staples. Her partners, the newspaper reported, were Nick Perata, Mike Rosati, and Timothy Staples' son, Sean.

Polka, and Staples did not return phone calls seeking comment. Attorneys for Nick Perata and Perata-Rosati told other news organizations that their clients did nothing wrong.

Several of Hu's known clients contacted for this story either refused to comment or did not return phone calls. Her clients include the biggest developers in town, including the DeSilva Group, Forest City, Hal Ellis and Jim Falaschi, and Signature Properties. All four also have close ties to Perata and all have won approval by the city in the past year for development projects that are worth hundreds of millions of dollars and have been decried by opponents as sweetheart deals.

The revelations about the public corruption investigation come at time when Perata has been naming his choices to Senate leadership posts when the Legislature reconvenes on December 6. Political observers said it's too early to tell what the effects of the investigation will be.

"I don't think his leadership position will be affected -- unless there are indictments," said Bob Stern, president of the Center for Governmental Studies in Los Angeles. "But he won by a very narrow margin. The real question is whether there will be another vote."

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